What Business Can Learn from Government

Author: Lawrence Greenspun and Rick Wartzman

In 1989, Peter Drucker wrote an article for Harvard Business Review titled “What Business Can Learn from Nonprofits.” As the story goes, the concept was so counterintuitive that readers thought the magazine had made a huge typo; surely, it had gotten things backwards.

We wouldn’t be surprised if readers had the same reaction upon seeing the headline that sits atop this piece. What, after all, could government possibly teach business?

As it turns out, plenty. Despite the public sector’s blanket reputation as a bureaucratic backwater, there are countless examples of civil servants doing highly effective work. A number of cities, in particular, have become hotbeds of innovation, in no small part because of the fiscal strains they face.

With Washington mired in gridlock, local governments are being left “to grapple with super-sized economic, social, and environmental challenges,” Bruce Katz of the Brookings Institution has asserted. The good news: They’re responding “with pragmatism, energy, and ambition.” In fact, from our perch at the Drucker Institute — as we guide municipal leaders through the “Drucker Playbook for the Public Sector,” a training program distributed in partnership with the National League of Cities — we see local agencies performing particularly well in three areas.

The first is exemplified by South Bend, Ind., which is spurring rank-and-file workers to view themselves as innovators — a tough thing for many corporations to get right. As we’ve observed, it’s a mindset that starts at the top.

In the case of South Bend, that means Mayor Pete Buttigieg, a former Rhodes scholar and McKinsey consultant, who has been known to challenge city workers to tackle problems so thorny that they can only be solved with new kinds of thinking. In 2013, for instance, Buttigieg called for staffers in just 1,000 days to address, through rehabilitation or demolition, 1,000 vacant and abandoned properties blighting the city. They are now on pace to beat his ambitious timetable.

“Mayor Pete frequently says, ‘If we’ve never done it that way before, we’re on the right track,’” notes Scott Ford, the executive director of the city’s Department of Community Investment, which is responsible for economic development in South Bend. In turn, Ford has issued a mandate to his direct reports: He expects them to carve out real time to work on policy innovation, and not just concentrate on programmatic execution.

The results are tangible: Largely through the efforts of a single front-line employee and two middle managers working in Ford’s shop, South Bend last year streamlined and automated its tax-abatement petition process. Specifically, these staffers figured out how to slash the application from 22 pages to 4. What’s more, they made it so that those seeking tax relief now fill out a common online application, which allows the city to track their progress, monitor delays, coach them through any hiccups, and help them hit all deadlines.

It’s hardly an isolated example. In the past year, Ford’s people have also come up with fresh ideas to simplify accounting approvals, better track low-income housing tax credits, and speed up the transfer of funds.

That a place like South Bend has been able to cultivate this kind of bottom-up innovation makes sense. Although government workers are widely considered apathetic, research shows that many of them “enter public service because they are already committed to the mission of government” and are eager to make “a positive difference in the lives of the citizens they serve,” as Robert Lavigna, the author of Engaging Government Employees, commented recently. For companies trying to convey a strong sense of purpose to their workers, there is much to be learned here.

A second area in which cities are operating at a world-class level is in gathering and analyzing data to enhance performance. Take Louisville, Ky., which is pushing hard to constantly answer some key questions: What is city government doing? How well are we doing it? And how can we do it better?

Backed by the city’s LouieStat database, officials in 2014 were able to, among other things, reduce hospital turnaround times by an average of nearly 10 minutes for Emergency Medical Services personnel, making them available for more runs; slash the portion of restaurants, public pools, and other facilities in Louisville not receiving health inspections on a timely basis from 10.5% to less than 0.1%; and cut repair time for the city’s vehicle fleet to just 19 days from 77.

It’s not merely theory that government has much to teach business about using information effectively. Humana, the health insurer, helped Louisville get its performance-improvement team rolling a couple of years ago by offering pro bono support and teaching city staff about Lean and other management techniques. Humana executives still provide mentoring and coaching. But now, Louisville is also sharing with the company its own knowledge on a topic in which it has developed considerable expertise: linking performance management with innovation.

In addition, the city has become active in the Association of Internal Management Consultants, exchanging best practices with managers from Coca-Cola, Bell South, Turner Broadcasting, and other corporations. “It’s really a dialogue back and forth,” says Theresa Reno-Weber, Louisville’s chief of performance and technology. “We’re learning from one another.”

The third area in which cities are excelling is in arming residents with technology to improve government services. Among those leading the way is Boston, whose Citizens Connect mobile app allows people to report on potholes, graffiti, and other neighborhood nuisances. Now, the city is trying to take the technology even further by having it foster real civic engagement.

We are certainly not saying that all cities are well managed. Mindless bureaucrats abound in too many locations. Episodes of waste, fraud, and abuse are easy to cite, as well. When it comes to government, “it’s very easy for us—people associated with corporate entities or people doing research on the corporate world—to be somewhat condescending, dismissive,” Yvez Doz, an INSEAD professor, remarked last year.

But to see only the warts is to miss a huge opportunity. The best-run government operations have much to teach business, just as the best-run businesses have much to teach government. As Peter Drucker knew, the same holds true for nonprofits. Clearly, no sector has a monopoly on wisdom.

Lawrence Greenspun is a senior program developer and manager at the Drucker Institute, a social enterprise based at Claremont Graduate University.

Rick Wartzman is the executive director of the Drucker Institute at Claremont Graduate University and writes frequently about management and leadership. His most recent book is Drucker: A Life in Pictures. Follow him on Twitter @RWartzman.


Published on January 12, 2015 by the Harvard Business Review